Howden Re, a global reinsurance intermediary and specialist risk analytics adviser, has examined how the latest advances in catastrophe modelling could influence the way insurers and reinsurers assess exposure, manage portfolios and make reinsurance purchasing decisions.
According to Howden Re, as model developers introduce more up-to-date climate data and revised approaches to estimating losses, the company highlights both the opportunities for more tailored risk assessment and the need to interpret results with care.
Catastrophe models have traditionally drawn heavily on historical events and long-term datasets to estimate the potential financial impact of natural hazards. However, changing climate conditions, extreme weather events and developments in the built environment are prompting model providers to reassess how past experience informs present-day risk.
For insurers and reinsurers, these changes could affect estimates of potential losses, with implications for underwriting, capital management and reinsurance programmes. Howden Re notes that while the latest modelling techniques offer new ways to examine catastrophe exposure, changes in model outputs need to be considered alongside the assumptions, data and methodologies that underpin them.
Recent updates from Verisk and anticipated developments from Moody’s RMS illustrate the direction of travel. Both providers are moving towards approaches that incorporate more current climate and environmental conditions, alongside historical information, to provide alternative perspectives on catastrophe risk.
According to Howden Re, this progress gives the industry further opportunities to assess exposure, but it also raises questions about how best to compare model results and determine whether changes in estimated losses reflect underlying risk or revised modelling assumptions.
Although there is broad agreement that the natural catastrophe risk landscape is changing, the extent and nature of those changes remain debated. The degree of confidence in current assessments also differs between perils, making it important for insurers and reinsurers to understand the limitations of individual models.
“Each new model release brings a new way of interpreting the historical data,” commented Anna Pergerson, Managing Director, Head of Catastrophe R&D at Howden Re. “But models are not all updated at once, so the industry is working with a mix of views across perils. Understanding what is driving shifts in modelled losses, and where uncertainty remains, matters more now than ever.”
One of the most significant developments identified by Howden Re is the increasing use of a ‘near-present climate’ perspective. Rather than relying exclusively on long-term historical averages, this approach seeks to reflect current and near-term climate conditions when estimating potential catastrophe losses.
Verisk has introduced this approach in its updated hurricane model, following earlier revisions to its wildfire and severe convective storm models. Moody’s RMS is also expected to adopt a similar approach in its HD hurricane model, which is due for release next year.
Another area of development is the greater transparency of the climate assumptions used in catastrophe modelling. Model providers are increasingly incorporating indicators such as the El Niño-Southern Oscillation (ENSO) and sea surface temperatures (SSTs), allowing users to investigate how different environmental conditions may influence simulated events and potential losses.
Verisk’s updated hurricane model, for example, enables simulated years to be associated with specific ENSO phases and Atlantic Ocean temperatures. This allows users to analyse groups of events under particular conditions and construct more tailored assessments of risk. Moody’s RMS plans to incorporate ENSO as a predictor in its new HD hurricane model, alongside the North Atlantic Oscillation (NAO), which the company says affects storm tracks.
Howden Re also points to the growing availability of climate-focused analytical tools, including solutions developed by the major modelling providers. These tools allow users to test the sensitivity of model results to different climate scenarios and examine how alternative conditions could affect their portfolios.
“These updates give insurers and reinsurers more flexibility in how they assess catastrophe risk,” added Sid Sasanian, Managing Director at Howden Re. “Being able to test how modelled losses change under different ocean and weather conditions gives clients a clearer view of the range of possible outcomes. That supports better decisions on portfolio strategy and reinsurance structure.”
While these capabilities broaden the options available to risk managers, Howden Re stresses that more advanced modelling does not remove the need for additional analysis. This is especially important for geographically concentrated portfolios, where a limited number of simulated events may not adequately represent the range of potential losses in a particular location.
“More detailed modelling does not necessarily produce a more reliable view of risk,” continued Sasanian. “Independent analysis and specialist judgement are becoming more crucial as the value now lies in knowing where a filtered view adds insight and how much confidence to place in the results.”
Howden Re argues that vendor models should be considered an important part of the risk assessment process, rather than a complete representation of catastrophe exposure. Concentrated portfolios and the interaction between natural hazards, local conditions and patterns of development can introduce complexities that are not fully captured by a single modelling approach.
To address some of these limitations, Howden Re supplements third-party models with proprietary analytical capabilities designed to provide additional insight into specific exposures. Its Blaze Index, for example, assesses present-day wildfire risk using information on fuel conditions, climate and the relationship between communities and their surrounding environments, rather than relying solely on the historical record of wildfire events.
“Blaze isn’t built on the historical record of wildfires,” added Pergerson. “It gives us the best current estimate of the risk, based on fuels, climate and how communities interact with both. As that underlying data changes, so does our view.”
The company’s Portfolio Accumulation Tail Hazard (PATH) capability offers a complementary approach to understanding wildfire concentration risk, helping to identify clusters of exposure that could be affected by a single event.
In its Who dares wins report, Howden Re highlighted how PATH analysis undertaken in 2024 identified concentrations of high-value properties that subsequently overlapped with the footprints of the Palisades and Eaton fires in California in January 2025. The example illustrates how analysing the geographical concentration of assets can provide an additional perspective on potential catastrophe losses.
As model developers continue to refine their methodologies, Howden Re expects insurers and reinsurers to gain more options for testing assumptions and assessing portfolio vulnerabilities. However, the company emphasises that movements in modelled losses can have several explanations, including changes to underlying data, modelling techniques and assumptions about climate conditions.
An increase in estimated losses does not necessarily indicate an equivalent increase in the underlying risk. Similarly, an unchanged model result does not, in itself, demonstrate that an exposure has remained stable. Distinguishing between changes in actual risk and changes in its modelled representation is therefore an important part of interpreting the results.
“No single model will give the industry the full picture,” continued Pergerson. “The firms that test new capabilities carefully, and combine models with their own analysis and specialist expertise, will be the best placed to understand how their exposures are changing.”
For Howden Re, the direction of travel in catastrophe modelling presents opportunities to improve the assessment of natural hazard exposure, but the value of new capabilities will depend on how they are applied.
Combining updated models with independent analytics, scenario testing and specialist interpretation can help insurers and reinsurers make more informed decisions about underwriting, portfolio management and reinsurance purchasing as their understanding of catastrophe risk develops.
